Greenspan Says Credit Crisis Is Worst in 50 Years

Former Federal Reserve Chairman Alan Greenspan said the current credit crisis is the worst in at least 50 years.

The current credit crisis is the most wrenching in the last half century and possibly more, Greenspan told a conference in Tokyo today via satellite from Washington.

Greenspan's remarks echo the assessments of economists including those at the International Monetary Fund, and may add to pressure on policy makers to strengthen their response to the credit crunch. Federal Reserve officials last week acknowledged that capital markets remain distressed even after the fastest interest-rate cuts in two decades.

Greenspan, 82, said the extent of damage stemming from the collapse of the subprime-mortgage market won't be known for months.

Have we reached a point where prices are stable? We cannot know that for a couple of months, he said. He added that prices may begin to stabilize by the start of 2009 as home inventories decline.

The yield on the 10-year note fell 1 basis point to 3.53 percent as of 10:07 a.m. in Tokyo, according to bond broker Cantor Fitzgerald LP.

Greenspan said inflation will be contained during the current slowdown before picking up as the world economy recovers momentum.

Economic Slack

It's difficult to imagine any major breakout of inflation as economic slack continues to increase, he said. What we will see is gradually rising inflationary pressures that will probably be subdued during the current period of slack, but that will surely reemerge when economies pick up.